Federal Government Partial Shutdown Update No. 3 - The Aftermath

It’s finished - right? Well, maybe, but think about a few items that may follow.

If any filing was made with a federal court or federal administrative board that was not acknowledged as received and filed, file it again as soon as practicable with proof of the earlier attempt to file. Since federal courts have remained open, this should not be an issue there. However, certain federal administrative bodies have literally been closed, such as the GAO and the Small Business Administration Office of Hearings and Appeals. At worst, the second filing will be deemed unnecessary.

Concerning contract administration matters, delays may continue. Consider how many emails and telephone messages would be waiting for you after returning from a 16-day absence from your office. That is what greeted government employees when they returned to work. And, their priorities may have been scrambled by the shutdown. What was most important back on September 30, may now be priority number three or seven. Follow up but be patient and respectful. The squeaky wheel gets the grease.

Interest on late payments is supposed to be automatic. Don’t count on it. Interest rates are very low on payments due from the government; therefore, while it might be worth a letter or email to the Contracting Officer, it may not be worth full-on claim activity.

While government employees presumably will get full back pay, contractor pay liabilities will differ. The government will only pay for progress made or, under a cost-type contract, for actual work performed with labor costs incurred. Contractor liability for labor costs may not be the same as the government’s liability under the contract. For trade workers covered by Davis-Bacon, the Service Contract Act, the Contract Work Hours and Safety Standards Act, collective bargaining agreements, or other contractual agreements, the obligation to pay prevailing wages, overtime, and differentials continues for work performed regardless of government liability for labor costs. The trickiest aspect of pay liability may result from application of the Fair Labor Standards Act if covered employees (salaried managerial personnel and hourly support personnel) were furloughed (laid off) or pay reductions were implemented.

Concerning pending offers in response to government solicitations, prepare to protest. For unsuccessful proposals submitted under a Request for Proposals, always request (demand) a timely debriefing. There could be a flurry of awards in the short term. In addition, the Department of Defense announced that some awards were being made but not announced during the partial shutdown. It remains to be seen whether time limits related to protests are enforceable; however, if a protest is not submitted, there is zero chance of prevailing.

As stated in one of our earlier updates, the government will likely defend any request or claim for extra costs or time by asserting a Sovereign Acts defense. Lost profits will very likely not be recoverable. There is some legal precedent supporting recovery since the shutdown was not directed at contracts but had incidental impacts on some contracts. This would especially be true if the government did not stop your contract work or, more to your advantage, explicitly directed that work continue, that the contractor workforce be maintained, or that you had to be prepared to resume work immediately after the shutdown ended. At the least, construction critical path delays should be compensated by award of a non-compensable but excusable time extension. Again, if you don’t ask, you cannot possibly get, whether extra costs or time. Any request for costs, as with almost any request or claim, must be supported by detailed records and costs must be reasonable, allocable, and allowable. Time extension requests must be supported by a reasonable and realistic schedule which has been routinely updated.

If you watch the news, you realize that this may have been a rehearsal for the next event in early 2014. Compile lessons learned from this partial shutdown in the event Washington cannot get it together in the next three months. One thing that may be considered is a provision in your subcontract form that allows you to direct a stoppage of subcontract work when government operations cease and you are stopped by the government. Such a provision would flow down the same remedies for the subcontractor as are available to you from the government. Modifying existing subcontracts could be proposed along the same lines.

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.